After spending a couple of years, pursuing a career or at least a side hustle in trading the financial markets, I realized it was not for me. Here are some of my conclusions.
Over the past couple of years, I became fascinated by the idea of trading the crypto and stock markets to make a living.
I remember back in 2016, first reading a blog article about building a crypto trading bot with NodeJS. This was fascinating to me. Basically, the idea of building a money printer.
Fast-forward to today, and the concept is much more complex than initially anticipated. My first few tries usually ended in me realizing that my approach to building an algo-trading bot was much too simplistic and once I started to go live, gains quickly turned into significant losses.
I was convinced I needed to read and learn more about manual trading before I could automate it. At first, this seemed like an intriguing and creative problem - an interesting puzzle. A couple of years down the line, I’ve changed my mind.
I saw myself in a position of transitioning away from a day job in software engineering to make a living trading the markets (automated or manually). But the reality of trading was less attractive than my status quo: working in tech.
The initial process of coming up with a trading strategy was always quite fun and much more creative than the grunt work of backtesting and optimizing required to validate one of these ideas. After a while, it took a lot of effort to push myself through it.
This step is quite gruesome. Hours and hours of reviewing trades (made by you or the bot), just to ensure the strategy performs as intended according to certain metrics. This is how I spent 80-90% of my time. I quickly got tired of looking at charts and tables for days on end.
In trading, you need to risk capital to gain capital - that could entail losses you can not afford. Purported flexibility and work-life balance advertised by many are mostly a farce. The work schedule is more akin to that of a factory worker. Extremely rigid and inflexible, in fact - you need to be in your seat in front of the screen when the market opens. Then the income: not as great as is seems. Even if you spend 5-10 years on becoming an excellent trader and manage to trade for a prop firm with a 1-million dollar account, realistically, you won’t be making much more than 200K/year before taxes - nothing unheard of in tech regarding salary.
Considering you could be spending these 5-10 years on any other business or occupation, it seems like a tough sell, especially when you factor in the high risk you’re exposed to every day (a significant unforeseen economic event could wipe out your account any day). Think of all the businesses you could start in the same time frame.
Another problem is that the financial markets are, in fact, a perfect zero-sum game. For every winner, there must be a loser at the other end of the transaction. If you get good, you get good at taking money from other people’s pockets. The economy is made up of people, not money.
Ultimately, trading makes sense if you look at the world from an amoralistic pure market perspective. Trading in the financial markets is lucrative; therefore, according to market logic, it’s what society values.
Many occupations could earn you a high income, but the positive impact on society is questionable at best (NFT-peddlers, Too-Big-To-Fail Hedge Funds and the like). On the flip side, often underpaid jobs like teachers, nurses and doctors seem to be less valuable to society, signaling the rational agent (Homo Economicus) that he should pursue different occupations.
Societies organized around a pure profit motive and this rigid market logic are ugly, exclusive and dysfunctional. The Over financialization of most leading economies in recent decades serves as a great example.
By now, spending so much time buying and selling derivatives or stocks seems like a pointless deed to me. Any factory worker appears to be adding more general value by producing an actual physical product. I’d rather spend my time developing something with a more tangible positive impact, my own projects or something for my clients.
Will I never trade again? I don’t think so. I learned a lot during my past years, and I feel infinitely more comfortable investing passively (buying stocks I like and holding them for a couple of years). I will look at trading more like a puzzle or professional gambling. More like a toy than a serious occupation. There are better, more meaningful ways to make money.